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How to pay international employees in 2025

March 3, 2025

7 Mins Approx

How-to-pay-international-employees4

Key takeaways

  • To pay overseas employees, companies must comply with the regulations of each employee’s local country.
  • For companies with international employees, global payroll platforms provide the simplest solution.
  • Multiplier’s streamlined global payroll platform helps companies pay employees in 100+ countries.

A global workforce brings a wealth of skills and experiences, but the perceived complexities of paying international employees can prevent companies from accessing these diverse talent pools. 

Organizations have to follow the rules and regulations of each employee’s local country and face serious consequences if they fail to comply. As Menaka Karthikeyarayan says, “From understanding employee benefits to minimum wage standards to tax obligations, laws go into the minutest details and it becomes very difficult.” 

If you’re wondering how to pay international employees, the good news is there are actually several straightforward options available.

In this article, you’ll learn how to navigate the complexities of paying international employees with the help of subject-matter experts – so you can hire around the world with confidence.

The challenges of paying wages to overseas employees

Here are some of the factors that can make paying wages to overseas employees a challenge.

Compliance concerns

Companies must have the correct processes and systems in place to comply with the rules and regulations of each foreign employee’s local country. 

This means following each country’s rules for providing compensation, including statutory laws like the national minimum wage and regulations around pay frequency. 

It also involves following local data protection laws. For example, companies in the US or other non-European countries with employees who are EU citizens and residents must comply with the General Data Protection Regulation (GDPR).

In the event of layoffs, companies must follow local rules regarding notice periods, fair termination, and severance pay. These laws can vary wildly around the world. In Europe, for example, they’re far more generous than in the US. 

Failing to comply with any of these local rules can have serious consequences. As Global Payroll and People Leader Ian Giles says, “Ensuring compliance with these regulations is critical to avoid fines and reputational damage.”

Reporting requirements

Each country also has its own set of requirements for reporting wage payments to the government. 

UK payroll, for example, uses a mandatory system called RTI (Real Time Reporting) to report payments to HMRC, the UK tax authority. In the US, companies must report wages to the IRS.

As with other aspects of payroll compliance, companies must meet the reporting requirements of each international employee’s local country in order to avoid time-consuming legal issues. 

International payroll taxes 

Employers must also follow local rules for handling payroll taxes. Here’s a brief breakdown of what each of these taxes involves:

  • Payroll taxes are the taxes employers and employees must pay based on an employee’s wages, tips, or salary. Employers withhold a portion of an employee’s earnings from their paycheck and then contribute an additional percentage.
  • Income taxes are the taxes employees must pay based on their gross income. Employers are responsible for withholding the correct amount from each employee’s paycheck and paying it to the government.

Employers must withhold and contribute the necessary amounts of both payroll tax and income tax in each international employee’s local country. 

A US company with an employee based in Germany, for example, must comply with German payroll and income tax laws. This means withholding the correct amounts from the employee’s wages, contributing the correct amount, and making payments to the German tax office at the correct times.

Companies that pay payroll and income taxes in other countries must keep the relevant tax documents and receipts to prove they’ve complied with the rules. 

Currency fluctuations

Paying employees in their local currency can be complicated and inefficient because of fluctuations in exchange rates. These values go up and down every day, which means the amount that companies pay – and the amount employees receive – can vary from one payment to the next. 

As a result, employers often decide against standard bank transfers and seek alternative ways to pay their overseas employees.

Five ways to pay foreign employees

There are several ways to address these challenges and pay international employees in a compliant and effective way. And as Michael Nierstedt, Product Director of Global Payroll at Multiplier described in a recent webinar, the most important thing is to choose a partner that can help you make the decision. 

“Multiplier not only provides payroll support, but also assistance and guidance on when you should be using Employer of Record or global payroll, what makes sense for your business and when,” he says. 

1. Set up an entity and use local vendors

In this scenario, you establish a legal business entity (or “local office”) in each employee’s country. You then outsource payroll, compliance, and tax filing to a local payroll vendor. 

This option requires you to:

  • Register a legal business entry in each country where the company has workers
  • Register for tax and payroll in those countries
  • Hire local payroll providers or accountants to handle activities like payroll processing and tax filing 
  • Set up local bank accounts for making salary and tax payments

With this approach, you retain full control of your employment relationships. However, opening a legal entity can be fraught with challenges. It’s time-consuming, expensive, and unlikely to be cost-effective if you only have a small number of employees in a particular country. 

There are other issues to consider too:

  • Collaborating with vendors around the world makes paying international employees even more complex, requiring you to liaise with multiple third parties frequently.  
  • Time differences can make this even more challenging.
  • Outsourcing payroll to local vendors can create a poor experience for employees – if they have an issue with payroll, you won’t be able to resolve it directly.
  • With employee data shared and stored in multiple locations around the world, there’s an increased risk of errors and breaches in data privacy.
  • Having no visibility of the payroll process makes it more difficult for you to ensure compliance with local tax laws. 

2. Set up an entity and manage payments in-house

Here, you set up a legal entity in the employee’s local country but, instead of outsourcing payroll to a local vendor, you process payroll and manage payments using payroll software. 

The most popular payment methods are:

  • Local bank transfer: this option allows you to pay employees in their local currency but means you have to set up and fund local bank accounts.
  • SWIFT transfers: these international wire transfers can be made from the company’s regular bank account, but they can be slow to process and often carry transaction fees. 
  • Digital payment options: these multi-currency apps (e.g. PayPal, Revout, Wise) offer low fees and speedy transfer times but don’t work at scale.

After selecting the best payment method, you must then calculate and process payroll based on local tax rates and deductions. You then have to file and report payroll directly to each local government.

While this solution gives you full control over payroll and payment processes, it creates an administrative burden for in-house teams. There’s also a greater risk of compliance errors if your payroll department lacks local expertise in a particular country.

3. Opt for leased employment

Employee leasing is an employment model where, instead of hiring workers, companies lease their services from an employee leasing agency or staffing agency.

As the workers’ formal employer, the leasing agency handles everything relating to local payroll, tax compliance, and employment law.

To pay an international worker through employee leasing, you would need to:

  • Find a leasing firm in the worker’s country
  • Sign an employee leasing agreement outlining the worker’s role, pay, and responsibilities
  • Pay the leasing firm for its services 

The leasing firm then pays the worker according to local laws.

While employee leasing eliminates the need to set up a legal business entity in another country, there are some drawbacks:

  1. You lose control of the employment relationship, as the contract is between the worker and the leasing firm. 
  2. Employee leasing isn’t available in every country– it’s heavily restricted in France and Germany, for example.
  3. Leasing agencies often charge high service fees. 

4. Use an Employer of Record 

An Employer of Record (EOR) is a third-party organization that helps companies hire, manage, and pay international employees without having to set up a business entity in another country or engage a leasing agency. 

An EOR provider officially employs the worker, managing all aspects of employment and compliance on your behalf, including onboarding and attendance. EOR platforms pay international employees in their currency while complying with local tax and labor laws.

Using an EOR to manage employment and payroll for employees in countries where you don’t have a local office is straightforward. It involves:

  • Choosing an EOR provider that operates in the relevant countries
  • Signing an agreement with the EOR that outlines the worker’s employment terms

Multiplier’s compliant-by-design Employer of Record platform provides access to an industry-leading owned-entity network of 150+ countries. This means you can onboard global talent seamlessly and compliantly, completing onboarding for each employee in under 48 hours and then outsourcing payroll, benefits, and other time-consuming HR tasks. 

5. Use a global payroll platform

A global payroll platform automatically calculates multi-country tax, benefits, and compensation so you don’t have to. Let’s say you’re paying an employee in the US and another in Germany, the platform ensures compliance with both IRS and Sozialversicherungsbeiträge regulations, automatically deducting the correct taxes, social contributions, and benefits, so all you have to do is hit approve. 

The right system also takes care of payments and reporting so you can take control of your entire payroll process in one place. As Giles explains, “With centralized data, global payroll platforms provide companies with a single source of truth, enabling better workforce planning and financial forecasting.” 

This need for consolidation makes a global payroll solution an important solution for teams who are using all types of solutions to pay international employees. Without it, you can end up spending hours communicating with local vendors. With it, you can see your EOR-managed employees and those you pay in-house, with no need to navigate between different solutions. You can also integrate with time-tracking software, your HRIS, and more. 

Overall, a global payroll platform ensures a consistent experience for your employees and your team. As Karthikeyaraya points out: “It standardizes all the processes relating to payroll across every country your company operates in. This stops people working in silos.”

Take control of global payments with Multiplier 

The right solution for paying international employees will depend on your company’s long-term goals. If you want to set up a local office and set up a long-term presence, you’ll save money by using in-house teams and leveraging the compliance expertise of a global payroll platform. 

If you plan to employ staff in countries with no local office, Multiplier’s Employer of Record platform can handle and pay teams for you, ensuring adherence to local labor laws across 150+ countries. You can then bring all data about international payments into one centralized location with a global payroll platform.

No matter which route you choose, one thing is obvious — there’s no need to pay for dozens of local vendors across regions or to spend hours managing solutions when you can use a global payroll platform like Multiplier. Our global payroll solution has:

  • 99.95% accuracy in every cycle 
  • On the ground local expertise
  • Support for 100+ currencies
  • 24/5 help

Make global hiring a breeze. Book a demo to find out more.

Picture of Jessica Farmer
Jessica Farmer

Freelance SaaS Content Writer

Jessica Farmer is a freelance SaaS content writer. She writes engaging and informative articles on HR trends, learning technology and innovative software that solves business problems.

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